In John Sicard’s white paper, “Four Steps to Take to Prepare for the Recovery”, you don’t have to look any further than the second line of the white paper to understand the value delivered in the content. That line is, “Strategic Supply Chain Management Strategies to Maximize Operations Performance over the Long Term.” The important point to understand about the white paper is that the four steps John describes to prepare for the recovery is not a “throw away” effort once we start to bounce back from the recession will benefit companies for the long term in any economic condition. The strategies described will serve any company well regardless of what “chaos” is inflicting pain on their supply chain or what state the economy is in. Let’s take a closer look at the four steps.
The first step involves getting data. It is critical to establish “one version of the truth”. The challenge for most companies in getting to one version is including all data regardless if it resides in a single instance of ERP or disparate data sources across the globe. Getting a single view of your supply chain data is the enabler, as John describes, for “embracing the chaos.” Even in stable times, imagine the value of being able to respond to a customer request in seconds? This is only possible when a user has access to a single version of the supply chain and also the ability to instantly model the request or change to understand impact and decide on the proper response. As suggested, getting to this point requires a methodical, phased approach but will be well worth the effort.
Step two is described as establishing “a robust supply chain surveillance system”. This really comes down to knowing sooner. Many times, if a person just knows sooner they can respond more effectively and in a timely manner. The other key ingredient to knowing sooner is to know the impact sooner. It is one thing to know there will be a supply disruption, for example an order will miss its due date. Perhaps the material was not actually needed on the due date and this order could have been delayed in the first place. On the other hand, the late supply could seriously impact the delivery of key customer orders. Cutting through the noise and getting to those issues that need immediate attention will allow users to know sooner AND respond sooner. This leads us to the third step.
The third step is empowering people to collaborate. When people know sooner, as described in step two, resolving issues is rarely done in isolation. The best solutions are collaborative. It will be the people that will formulate and decide on course corrections and as John quotes this will be the difference between success and failure. It is this collaboration the will enable step four.
Merging supply chain planning and execution will be dependent on the first three steps. Consider Sales and Operations Planning (S&OP). Getting data and establishing one version of the truth will allow you to see impact at the lowest level when establishing demand plans and modeling such changes as a forecast decrease, price reduction or new product introduction. No longer will you have to take the “swivel chair” approach to understand the impact your plan will have on the rest of the supply chain. Providing transparency and establishing the surveillance system will alert all participants of changes that impact the plan or the ability for operations to execute. Finally getting consensus on the plan requires the human element John describes in step three. You need all participants at the table to formulate, approve and course correct as required. This is something no mathematical model will ever be able to do. Taking S&OP from a monthly cycle to “S&OP on demand” will also differentiate the winners and losers.
Most likely the companies who will take action to execute on these four steps have already been continuously improving their supply chains long before the economic downturn hit, but as John alludes to, technology has finally caught up so that these supply chain leaders can take their performance to the next level. Fortunately for the rest, there is still time to catch up to take advantage of future opportunities.
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Tags: Collaboration, Sales and operations planning (S&OP), Supply chain visibility
Posted in Sales and operations planning (S&OP), Supply chain collaboration
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The four steps advised in John’s white paper “Four Steps to take to prepare for the Recovery”, are all good however, in my opinion these are all things that a good supply chain manager should have been working toward all along, not just as we are pulling out of a recession.
Almost anyone with some serious history under their belt knows that there will be a very sort period of time that needs to be prepared for and it is coming upon us fairly fast. That is the time when a given business enters the recovery mode, new sales orders make a rather rapid advance and most companies aren’t really ready. They have removed resource over the prior recession be it labor, inventory, or supply base and material flow to support the new low lwevel of business. Timing on this is critical, a given company will record some of it’s best cost efficiencies during this period because they are still afraid to expand the resource base and will do it with what they have until signs of prolonged growth, then suddenly business expands on broad based format and inflationary pressures begin to hit.
The few things that companies really should concentrate on today are:
-Rebuilding the supply base with expansion and inflation in mind, negotiate costs that will carry you far into the future and lock them down as best you can.
-Find and developed suppliers that may be more right sized for the new business to come.
-Improve internal efficiencies so you can carry the company further into the recovery without having to bring on new resource i.e. improve capital equipment, information systems etc., what ever one decides is going to be your shortfall in the coming inflationary battle.
All this is geared around trying to perpetuate those recovery efficiencies well into the up coming mature and probably inflationary economy.
I appreciate the comments, Ron, and your take on extending the list. Get enough of us in a Kaizen Event on this subject, and I’m sure we’d enjoy extending it further. I agree with you, that companies that have already established a strong position with the four improvement areas I talked about shouldn’t stop there. As you point out, yesterday’s supply base may not be appropriate for the shape of tomorrow’s business condition. That said, while it may be necessary, changing suppliers can be an expensive proposition for some organizations. I do believe there is still plenty of room to achieve significantly higher levels of operating performance through changes in business practices and information exchange with existing suppliers.
To your point on business conditions changing fast, I visited two large companies just last week, both mentioning increases in their business with ‘first ever’ stock-outs of raw material to meet the demand. We’re all hopeful that such a change will be sustainable.